Rio Tinto’s (ASX, LON, NYSE: RIO) iconic Argyle mine
in remote Western Australia, the world’s biggest and the main global source of high-quality
pink diamonds, will close in the fourth quarter this year, potentially pushing
prices up and spurring exploration.
The planned closure, the company said, will impact its total diamond output for the year. Rio now expects to produce between 12 and 14 million tonnes of rough diamonds in 2020, down from the 17 million tonnes it churned out last year.
The impact on Rio’s balance sheet, however, are expected to be minimal. Diamonds bring in only about 2% of earnings, while iron ore — the company’s main commodity — accounts for almost 60%.
Miner expects to see production of rough diamonds drop from 17 million tonnes last year to 12-14 Mt in 2020.
Pink diamonds, already rare, are about to get
scarcer as Argyle accounts for 90% of worldwide production of the coloured
precious rock. The mine has yielded more than 865 million carats of rough
diamonds since it opened in 1983 and, so far, there hasn’t been major
discoveries or projects capable of measure up to Argyle in terms of
production.
At its peak, the mine produced 40% of world diamond output
by volume. It still accounts for all of Australia’s diamond production.
Rio Tinto estimates Argyle’s direct contribution to the East Kimberley in roughly 6% of the region’s gross regional product.
Analysts and auctioneers alike expect prices for the unique
diamonds to go up. Pink stones have already been fetching record prices in the
past few months and the closure of their mine source could see that trend
strengthen.
In 2018, the 18.96-carat Pink Legacy sold for $50 million at Christie’s auction house, breaking the world record for price paid per carat for a pink diamond at auction.
At Sotheby’s Hong Kong October sale, one of the star pieces — described as an “exquisite 10.64-carat vivid purplish pink diamond” — sold for just under $20 million. Rio Tinto’s own data show that the prices for their Argyle pink diamonds have jumped by 500% since 2000.
The mining giant said the decommissioning and dismantling the mine would take five year, after which it would monitor the site for a period to be defined.